Sec. 61.47  Adjustments to the SBI; pricing bands.

    (a) In connection with any price cap tariff filing proposing changes 
in the rates of service categories or subcategories, the carrier must 
calculate an SBI value for each affected service category or subcategory 
pursuant to the following methodology:

SBIt = SBIt-1[i 
          vi(Pt/Pt-1)i]

where
SBIt = the proposed SBI value,
SBIt-1 = the existing SBI value,
Pt = the proposed price for rate element ``i,''
Pt-1 = the existing price for rate element ``i,'' and
vi = the current estimated revenue weight for rate element 
          ``i,'' calculated as the ratio of the base period demand for 
          the rate element ``i'' priced at the existing rate, to the 
          base period demand for the entire group of rate elements 
          comprising the service category priced at existing rates.

    (b) New services that are added to existing service categories or 
subcategories must be included in the appropriate SBI calculations under 
paragraph (a) of this section beginning at the first annual price cap 
tariff filing following completion of the base period in which they are 
introduced. This index adjustment requires that the demand for the new 
service during the base period must be included in determining the 
weights used in calculating the SBI.
    (c) In the event that the introduction of a new service requires the 
creation of a new service category or subcategory, a new SBI must be 
established for that service category or subcategory beginning at the 
first annual price cap tariff filing following completion of the base 
period in which the new service is introduced. The new SBI should be 
initialized at a value of 100, corresponding to the service category or 
subcategory rates in effect the last day of the base period, and 
thereafter should be adjusted as provided in paragraph (a) of this 
section.
    (d) Any price cap tariff filing proposing rate restructuring shall 
require an adjustment to the affected SBI pursuant to the general 
methodology described in paragraph (a) of this section. This adjustment 
requires the conversion of existing rates in the rate element group into 
rates of equivalent value under the proposed structure, and then the 
comparison of the existing rates that have been converted to reflect 
restructuring to the proposed restructured rates. This calculation may 
require use of carrier data and estimation techniques to assign 
customers of the preexisting service to those services (including the 
new restructured service) that will remain or become available after 
restructuring.
    (e) Pricing bands shall be established each tariff year for each 
service category and subcategory within a basket. Except as provided in 
paragraphs (f), (g), and (h) of this section, each band shall limit the 
pricing flexibility of the service category or subcategory, as reflected 
in the SBI, to an annual increase of five percent, relative to the 
percentage change in the PCI for that basket, measured from the levels 
in effect on the last day of the preceding

[[Page 117]]

tariff year. For local exchange carriers subject to price caps as that 
term is defined in Sec. 61.3(x), there shall be no lower pricing band 
for any service category or subcategory.
    (f) Dominant interexchange carriers. (1) The upper pricing bands for 
the evening MTS and night/weekend MTS service categories shall limit the 
annual upward pricing flexibility for those service categories, as 
reflected in their SBIs, to four percent, relative to the percentage 
change in the PCI for the residential and small business services 
basket, measured from the last day of the preceding tariff year.
    (2) Dominant interexchange carriers subject to price cap regulation 
shall calculate a composite average rate for services contained in the 
residential and small business services basket that are purchased by 
residential customers. Notwithstanding paragraph (f)(1) of this section, 
the annual upward pricing flexibility for this composite average rate 
shall be limited to one percent, relative to the percentage change in 
the PCI for the residential and small business services basket, measured 
from the last day of the preceding tariff year.
    (g)(1) Local Exchange Carriers--Service Categories and 
Subcategories. Local exchange carriers subject to price cap regulation 
as that term is defined in Sec. 61.3(x) shall use the methodology set 
forth in paragraphs (a) through (d) of this section to calculate two 
separate subindexes: One for the DS1 services offered by such carriers 
and the other for the DS3 services offered by such carriers. The annual 
pricing flexibility for each of these two subindexes shall be limited to 
an annual increase of five percent, relative to the percentage change in 
the PCI for the special access services basket, measured from the last 
day of the preceding tariff year. There shall be no lower pricing band 
for these two subindexes.
    (2) The upper pricing band for the tandem-switched transport service 
category shall limit the annual upward pricing flexibility for this 
service category, as reflected in its SBI, to two percent, relative to 
the percentage change in the PCI for the trunking basket, measured from 
the levels in effect on the last day of the preceding tariff year. There 
shall be no lower pricing band for the tandem-switched transport service 
category.
    (3) The upper pricing band for the interconnection charge service 
category shall limit the annual upward pricing flexibility for this 
service category, as reflected in its SBI, to zero percent, relative to 
the percentage change in the PCI for the trunking basket, measured from 
the levels in effect on the last day of the preceding tariff year. There 
shall be no lower pricing band for the interconnection charge.
    (4) Local exchange carriers subject to price cap regulation as that 
term is defined in Sec. 61.3(x) shall use the methodology set forth in 
paragraphs (a) through (d) of this section to calculate a separate 
subindex for the 800 data base vertical features offered by such 
carriers. The annual pricing flexibility for this subindex shall be 
limited to an annual increase of five percent, relative to the 
percentage change in the PCI for the traffic sensitive basket, measured 
from the last day of the preceding tariff year. There shall be no lower 
pricing band for this subindex.
    (5) The upper pricing band for the ``Signalling for tandem 
switching'' service category shall limit the upward pricing flexibility 
for this service category, as reflected in its SBI, to two percent, 
relative to the percentage change in the PCI for the trunking basket, 
measured from the levels in effect on the last day of the preceding 
tariff year. There shall be no lower pricing band for this service 
category.
    (6)[Reserved]
    (7) The initial level of the local switch trunk ports service 
category designated in Sec. 61.42(e)(1)(v) shall be established to 
include those costs identified pursuant to Sec. 69.106(f)(1) of this 
chapter. This level shall be assigned a value of 100, and thereafter 
must be adjusted as provided in paragraph (a) of this section, subject 
to the banding restrictions of paragraph (e) of this section.
    (h) Local exchange carriers--Density pricing zones. (1) In addition 
to the requirements of paragraphs (g)(1) and (g)(2) of this section, 
those local exchange carriers subject to price cap regulation that have 
established density pricing zones pursuant to Sec. 69.123 of

[[Page 118]]

this chapter shall use the methodology set forth in paragraphs (a) 
through (d) of this section to calculate separate subindexes in each 
zone for each of the following groups of services:
    (i) DS1 entrance facilities, DS1 direct-trunked transport, DS1 
dedicated signalling transport, and DS1 special access services;
    (ii) DS3 entrance facilities, DS3 direct-trunked transport, DS3 
dedicated signalling transport, and DS3 special access services;
    (iii) Voice grade entrance facilities, voice grade direct-trunked 
transport, and voice grade dedicated signalling transport, and (if the 
Commission, by order, designates such services as subject to 
competition) voice grade special access;
    (iv) Tandem-switched transport; and
    (v) Such other special access services that the Commission may 
designate by order.
    (2) The annual pricing flexibility for each of the subindexes 
specified in paragraph (h)(1) of this section shall be limited to an 
annual increase of five percent, relative to the percentage change in 
the PCI for the trunking basket, measured from the levels in effect on 
the last day of the preceding tariff year. There shall be no lower 
pricing band for these subindexes.
    (i)(1) Through December 31, 1997, notwithstanding the requirements 
of paragraph (a) of this section, and subject to the limitations of 
Sec. 61.45(j), if a local exchange carrier is recovering interconnection 
charge revenues through per-minute rates pursuant to Sec. 69.124 or 
Sec. 69.155 of this chapter, any reductions to the PCI for the basket 
designated in Sec. 61.42(d)(3) resulting from the application of the 
provisions of Sec. 61.45 (b) and the formula in Sec. 61.44(b) and from 
application of the provisions of Sec. 61.45(i)(1) shall be directed to 
the SBI of the service category designated in Sec. 61.42(e)(2)(vi).
    (2) Effective January 1, 1998, notwithstanding the requirements of 
paragraph (a) of this section and subject to the limitations of 
Sec. 61.45(j), if a local exchange carrier is recovering interconnection 
charge revenues through per-minute rates pursuant to Sec. 69.155 of this 
chapter, any reductions to the PCI for the basket designated in 
Sec. 61.42(d)(3) resulting from the application of the provisions of 
Sec. 61.45(b) and the formula in Sec. 61.44(b) and from the application 
of the provisions of Sec. 61.45 (i)(1), and (i)(2) shall be directed to 
the SBI of the service category designated in Sec. 61.42(e)(2)(vi).
    (3) Through December 31, 1997, the SBI reduction required by 
paragraph (i)(1) of this section shall be determined by dividing the sum 
of the dollar amount of any PCI reduction required by Sec. 61.45(i)(1) 
by the dollar amount associated with the SBI for the service category 
designated in Sec. 61.42(e)(2)(vi), and multiplying the SBI for the 
service category designated in Sec. 61.42(e)(2)(vi) by one minus the 
resulting ratio.
    (4) Effective January 1, 1998, the SBI reduction required by 
paragraph (i)(2) of this section shall be determined by dividing the sum 
of the dollar amount of any PCI reduction required by Sec. 61.45 (i)(1) 
and (i)(2) by the dollar amount associated with the SBI for the service 
category designated in Sec. 61.42(e)(2)(vi), and multiplying the SBI for 
the service category designated in Sec. 61.42(e)(2)(vi) by one minus the 
resulting ratio.
    (j) The calculation of the SBI for the service category designated 
in Sec. 61.42(e)(2)(vi) shall include any residual interconnection 
charge revenues recovered pursuant to Secs. 69.153 and 69.155 of this 
chapter.

[ 54 FR 19843 , May 8, 1989, as amended at  55 FR 42384 , Oct. 19, 1990;  56 FR 55239 , Oct. 25, 1991;  57 FR 54331 , Nov. 18, 1992;  58 FR 7868 , Feb. 
10, 1993;  58 FR 48762 , Sept. 17, 1993;  59 FR 10302 , Mar. 4, 1994;  59 FR 32930 , June 27, 1994;  60 FR 19528 , Apr. 19, 1995;  60 FR 52346 , Oct. 6, 
1995;  62 FR 4659 , Jan. 31, 1997;  62 FR 31932 , June 11, 1997;  62 FR 40460 , July 29, 1997]